Fiscal cliff: Colorado stands to lose $2.1 billion without a deal

WASHINGTON — Colorado stands to lose $2.1 billion in economic revenue and federal funds that will hammer defense contractors, elderly-community centers, local governments and more next year, mounting increasing pressure on Congress to unearth a solution to the "fiscal cliff" before Jan. 1.

The stark economic impact of the "cliff" — an end-of-year blend of deadlines and policy changes that include the end of Bush-era tax cuts for all income brackets and a $109 billion chop to domestic and military spending — comes from estimates from the business community, the defense-contracting sector and the governor's office.

"The most logical expectations in the present political climate don't hold true right now," Gov. John Hickenlooper said. "So we have to be prepared if somehow these forces get so crosswise that they can't reach a compromise. ... We obviously have to have a plan in place in case."

For state programs alone, Colorado stands to lose $67.9 million in federal money that feeds such core services as education and human services.

Hickenlooper says he has leaders from state agencies planning for the fallout if $109 billion is cut from the federal military and domestic spending budget.

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Colorado's almost $68 million figure reflects only the state programs that rely on federal money from the discretionary budget. It does not take into account how Colorado-based military installations — such as the Fort Carson Army base or the Air Force Academy — will fare with such cuts to the defense budget.

The $109 billion in potential federal cuts is a result of last year's Budget Control Act — legislation passed after a "super committee" composed of members of Congress couldn't strike an agreement on ways to cut the federal budget.

The cuts will be evenly distributed between military and domestic spending — something Republicans and Democrats say are pills of poison for both sides.

No one in Washington is publicly excited about the specter of a sequester. Almost everyone would be affected — defense contractors, local governments, the Pentagon, children, old people, highway contractors, people who care about food safety, education, college and human services.

Jobs would be lost. Some economists — and the U.S. Treasury Department — predict a second economic downturn if the "cliff" takes hold.

"Of course I'm worried," said Rep. Mike Coffman, R-Aurora, in an e-mail. "It is likely the effects of the sequester in the 6th (Congressional District) will primarily be felt at Buckley Air Force Base and by the contractors that support it. These are important to our local economy and national security."

It's unclear how Coloradans will fare with the income-tax changes. People in the state are slightly more dependent than elsewhere on investment income, where taxes are expected to rise, and the state has a higher share of households above the $250,000 income threshold proposed for the biggest tax hikes.

A study from the Tax Foundation, however, estimates Colorado taxpayers will have one of the smallest increases in taxes as a share of income of any state, 48th, assuming an expiration of all the Bush-era tax cuts. Because of a broad middle-class tax base here, the overall tax impact will be less in Colorado than in richer states such as New York and New Jersey.

The biggest problem for the Colorado economy is the uncertainty that businesses face, said Kelly Brough, president and chief executive at the Denver Metro Chamber of Commerce.

"Frankly, this way of making decisions, of putting businesses through this roller coaster, is just really devastating," she said. "Our message has consistently been to Washington that not only do you have to solve this one but that we can't continue to put ourselves against the wall in a deadline-driven environment."

Sen. Mark Udall agreed.

"We all know that sequestration will be bad for Colorado and for the country," he said. "The question now is whether Congress has the political courage to do anything about it. Americans are telling us that they want a resolution. 'Compromise' isn't a dirty word, but we still have a number of members of Congress who would rather sink the economy than compromise."

Capitol Hill has been a flurry of anxious lobbying from doctors, students, union members, city workers, people who build drones and people who teach college — the full panoply of what composes America.

Most say they are chiefly worried about the sequester because of its impact on local programs. Other organizations, such as charities worried about the elimination of the tax credit for charitable contributions, are also concerned about what congressional leadership may be negotiating away in a tax-code overhaul.

"It's hard to make the connection because there's not a huge understanding back here of what's happening," said Kirsten Silveira, a Colorado State University senior in D.C. lobbying this week on the impacts of the debt. "You can look at the fiscal cliff as an opportunity. ... We can hone in all of our different values and desires in the country and move forward."

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